Lafarge Africa to pay N13.01b dividend

The board of directors of Lafarge Africa Plc has recommended distribution of N13.01 billion to shareholders as cash dividend for the 2017 business year. The dividend represents 43 per cent increase on the dividend payout for the 2016 business year.

For the second consecutive trading session, Lafarge Africa’s share price rose by 35 kobo to close at N44 yesterday at the Nigerian Stock Exchange (NSE), playing a contrarian stock to the negative average day-on-day overall market return of -0.09 per cent. The cement company’s share price had risen by N1.25 or 2.95 per cent on Wednesday.

A breakdown of the dividend recommendation showed that shareholders will receive a dividend per share of N1.50, 42.9 per cent above N1.05 per share paid for the 2016 business year. The company has indicated that the dividend would be paid from its 2012/2013 pioneer profit reserve, implying that there would be no deduction of 10 per cent withholding tax.

Chief Executive Officer, Lafarge Africa Plc, Michel Puchercos assured that the cement company has been positioned to extract greater values for shareholders noting that the company’s recurring earnings before interest, tax, depreciation and amortisation (EBITDA) doubled to N57.6 billion in 2017.

He attributed the strong margins in the Nigerian business to cost initiatives and more favourable pricing.

According to him, Lafarge Africa’s industrial operations in 2017 were stable with plants operating at high reliability levels while the energy optimization plan for the company has been successful with increased use of alternative fuel and coal to offset gas shortages in operations in the Western Nigeria while plant operations in the eastern and northern part of the country relied mainly on gas and coal.

He said these logistic, commercial and operational initiatives helped to sustain market share in the year under review.

He pointed out that the South African business thrived in a challenging business environment, noting that operations in the country are set to stabilise in year 2018.

He added that South Africa’s Lichtenburg plant returned to normal operations in the course of the year and a turnaround plan was initiated in order to transform the company’s operations.

“The expected recovery in the macroeconomic environment in Nigeria is likely to have a positive impact in the overall cement market in Nigeria. Our Business turnaround actions will be consolidated further in 2018 through energy optimisation as well as commercial and logistic improvement. In 2018 we shall implement a continuous improvement programme that will see us building on earnings before interest, tax, depreciation and amortisation (EBITDA) margins above the 35 per cent benchmark,” Puchercos said.

He noted that the capital expenditure expectation for Nigeria will be mainly devoted to energy and production optimisation while the turnaround plan of the South African operations is focused on cost containment, commercial transformation and industrial stabilisation.

“The overall goal is to create value for shareholders through an attractive growth profile and good margins,” Puchercos said.

Meanwhile, key extracts of the audited report and accounts of Lafarge Africa for the year ended December 31, 2017 showed that the cement company’s group turnover rose by 36 per cent to N299.153 billion in 2017 as against N219.714 billion in 2016. Gross profit also increased from N40.66 billion in 2016 to N50.759 billion in 2017. However, administrative expenses spiralled from N23.737 billion in 2016 to N41.595 billion in 2017. Finance cost also jumped from N38.216 billion to N43.216 billion due to high charges on over draft and bank borrowings. Lafarge Africa’s total loans and advances doubled to N256.546 billion in 2017 from N104.709 billion in 2016. With these, the company recorded a pre-tax loss of N34.03 billion in 2017. Lafarge had used tax credit of N39.99 billion in 2016 to mitigate pre-tax loss of N22.82 billion to end the year with a net profit of N16.9 billion in 2016. However, with no tax credit in 2017 and a tax expense of N281.46 million, the mid-line costs weighed heavily on the bottom-line.

The decline in bottom-line performance was due to high administrative expenses and finance costs. Lafarge Africa however successfully raised N131 billion new equity funds through a rights issue in the last quarter of 2017, which is expected to restructure the balance sheet and deleverage the company, thus positively impacting finance costs.

The company also noted that a detailed review of key projects in Nigeria such as the road in Calabar and of mothballed assets in South Africa led to an impairment of N19.1 billion.

According to the company, the combination of these impairments and the net loss in South Africa of N187 billion led to a group net loss of N34.6 billion compared to a profit of N16.8 billion in 2016.